PwC Global Economic Crime Survey 2014: ‘Staff frauds on the rise’

PwC’s Global Economic Crime Survey 2014 states that the number of frauds committed by staff as opposed to those outside of an organisation has risen from 34% in 2011 to 41% in 2013.

The survey also shows that the profile of the typical fraudster is changing. Previous surveys found that middle management were often behind economic crimes. Now, the findings reveal that most economic crimes carried out by someone inside an organisation are by junior members of staff.

According to the survey of over 5,000 businesses (including nearly 400 from the UK), internal fraudsters are most likely to have been with a company less than five years.

Ian Elliott, PwC’s forensic services partner and author of the new report, commented: “Our survey shows the changing face of white collar crime in Britain today. More and more companies are feeling the pain as economic crime continues, despite ongoing attempts to tackle it. Organisations need to be ever-vigilant for suspicious transactions.”

UK businesses continue to suffer financially from fraud

UK businesses continue to suffer financially from fraud

Elliott added: “People may be feeling the effects of increases in the cost of living, giving them more incentives to turn to crime. As such, employers need to make it difficult for their staff to commit crimes. They cannot afford to be complacent.”

Watch a video of PwC’s Ian Elliott outlining key points uncovered by the survey

Type of fraud is changing

The survey findings record a fall in the number of UK organisations reporting economic crime, from 51% in 2011 down to 44% in 2013. However, fraud in Britain is still higher than the global average of 37%.

The type of fraud is also changing, with less accounting fraud as fraudsters turn to high-tech ways of committing economic crime. At the same time, companies have improved their internal controls and, as such, have made life more difficult for potential fraudsters.

Infographic showing key findings of the latest PwC research

There has been a small drop in the reported level of cyber crime which, at 24%, is down from 26% in 2011. Cyber crime was also responsible for 24% of all reported frauds.

UK businesses are more aware of the risks than ever – and more aware than their global counterparts (63% compared to 48% globally).

“Many people may not be reporting cyber crime simply because they don’t know it has happened, or because they want to keep it contained,” explained Elliott. “They are concerned about what effect it has on their reputation. It’s also important to remember that it’s not a technology problem. It’s a human problem, and the internal threat needs to be taken as seriously as the threat from outside an organisation.”

Less than a third of Board members (32%) reported fraud in their organisations, but below Board level this climbed to 63%.

For the purposes of the PwC survey, economic crime is described as: “The intentional use of deceit to deprive another of money, property or legal right”

For the purposes of the PwC survey, economic crime is described as: “The intentional use of deceit to deprive another of money, property or legal right”

“Increasingly,” continued Elliott, “we’re seeing fraud on the Board’s agenda but there is still a gap between what is being reported by the Board and the reality of what is taking place in British business today.”

Changes to policies and procedures

UK businesses continue to suffer financially from fraud. 52% felt the financial impact had increased in the last two years compared to 42% globally, but high value financial losses in the UK were lower than on the global stage (at 15% compared with 20% suffering losses in excess of $1 million).

As a result of the Bribery Act, which came into force in 2011, 87% of British organisations have made changes to policies and procedures and 37% have had a major overhaul of their anti-bribery policies.

“With little or no growth in the UK in the last few years, many British companies have looked overseas to some high risk markets,” outlined Elliott, “but they need to be on the alert for the potential bribery risks they may face when operating in these markets.”

UK businesses take a dim view of fraud and, in 88% of cases, it leads to dismissal compared to 79% globally. The police were called in to companies in 63% of cases compared to just 49% of frauds around the world.

In conclusion, Elliott explained: “When employees just receive a warning, or are transferred to another department, it sends out a message: the business tolerates fraud. However, UK bosses have taken a stand. They will not let employees get away with defrauding them, even if it means negative publicity for them as a result.”

About the survey

For the purposes of the survey, economic crime is described as follows: “The intentional use of deceit to deprive another of money, property or legal right”

In the UK, 372 people responded to the online survey. Respondents are from a mix of different sectors and represent listed, private and public sector organisations

60% of respondents to the PwC survey were senior executives

For the full UK and global report visit: http://www.pwc.co.uk/crimesurvey

To watch the live webcast at 11.00 am on Wednesday 19 February go to: http://www.pwcplayer.com/webcasts/2014_02_global_economic_crime_survey

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